Another Exec Quits Viacom in Shake-Up

Entertainment group chief Jonathan Dolgen departs abruptly after the resignation of Mel Karmazin.

Viacom Inc.'s tightfisted entertainment chief, Jonathan Dolgen, who revolutionized how movies are financed, resigned Wednesday after acknowledging that a shift in leadership at the company had left no room for him at the top.

Dolgen's exit followed by a day the resignation of his boss, Viacom President Mel Karmazin, who lost a four-year power struggle with the conglomerate's 81-year-old chief executive, Sumner Redstone.

For a decade, Dolgen helped make Viacom's film studio, Paramount Pictures, the most reliably profitable in the industry by forging financing agreements with rivals to spread the risk of a potential flop. But the conservative strategy also meant that the studio rarely swung for the fences with the bigger-budget movies that can bring box-office windfalls.

In recent years, Paramount has been bereft of the kind of successes enjoyed by competitors willing to dole out huge sums to draw stars to its ventures and put audiences in theaters. That didn't help Dolgen's standing at Viacom, and many at the studio say he is being unfairly blamed for Paramount's string of flops.

Dolgen didn't pick movies -- that creative responsibility rests with studio Chairwoman Sherry Lansing -- although he was responsible for their financing.

"Having more money would not have changed our results," Dolgen said in an interview Wednesday. "It was about the films we made."

His position at Viacom also wasn't helped, according to sources close to the company, by his legendarily rough-edged personality.

His new boss, Tom Freston, who turned Viacom's MTV Networks into a cable powerhouse, is known for a management style that is easygoing and accessible. Freston was promoted this week, along with CBS Television Chairman Leslie Moonves. The two men will assume Karmazin's former responsibilities and share the title of president, with Freston overseeing the movie studio.

The elevation of his two colleagues made it clear to Dolgen, 59, that he was no longer a contender to someday succeed Redstone, who said this week that he would retire in three years.

"I can't quarrel with their choices," said Dolgen, chairman of Viacom Entertainment Group, which had included Paramount Pictures, Paramount Television, Simon & Schuster, the Famous Players theater group and Paramount Parks. "But that structure didn't provide a role for me."

Dolgen's departure -- not officially effective until July 15 -- underscored the hands-on role that Redstone said he would assume now that the company he built into a media giant had been reorganized.

Redstone, who controls Viacom with 71% of its shares, had become more assertive in day-to-day operations as the stock hovered close to a 52-week low. He said on Wednesday that Viacom would return to its previous way of operating before its merger in 2000 with CBS Inc., then headed by Karmazin.

"In the old Viacom, nobody reported to anybody," Redstone said. "I was a real CEO then and we ran the company as a team. That's how we're going to run it now."

Redstone said he planned to set a new direction at Paramount Pictures, loosening the studio's purse strings to embrace bigger-budget movies.

The CEO cautioned, however, that the studio "will not be profligate.... It's not going to spend $200 million a picture like some of its rivals, but will have the money it needs to make pictures it believes in. You'll see them spending $100 million to $125 million on a film."

Concern over spending big -- and possibly losing big -- was behind Dolgen's pioneering co-financing strategy, crafted back when film production and marketing expenses skyrocketed in the mid-1990s. In an era of ever-escalating budgets, Dolgen promoted fiscal austerity. He sought to reduce risk on expensive movies by bringing in partners to share in the costs, and did so for almost every film on the Paramount slate.

Initially derided, the approach eventually was copied throughout Hollywood.

"He really reinvented the way to look at a global film model," said former Columbia Pictures chief Mark Canton, who worked with Dolgen at the studio in the early to mid-1990s.

For many years, Paramount prospered under this strategy, churning out such hits as "Saving Private Ryan" and "Braveheart," and a series of smaller films that also turned a profit.

One of Dolgen's masterpieces, which is still regarded as one of the savviest in Hollywood history, is Paramount's co-financing of James Cameron's costly epic, "Titanic," with 20th Century Fox.

Dolgen put a cap on what Paramount would spend. So when the budget soared during production, reaching $200 million, only Fox was on the line for the overages. Although both Fox and Paramount made a fortune when the movie grossed $1.8 billion worldwide, Paramount's take was far bigger.